SUPERFUND:

EPA cleanup tactic to face GE challenge in D.C. Circuit

Gabriel Nelson, E&E reporter

Greenwire: Thursday, May 13, 2010

Attorneys for General Electric Co. and U.S. EPA will debate the constitutionality in federal appeals court next week of a legal weapon often used by the agency to force the cleanup of the nation's most contaminated sites.

The case, General Electric Co. v. Jackson, focuses on "unilateral administrative orders," a privilege given to EPA by the Comprehensive Environmental Response, Compensation and Liability Act, more commonly known as Superfund.

Experts say EPA's ability to issue unilateral orders is the Superfund statute's heavy artillery, a deterrent allowing officials to reach settlements with companies that might otherwise resist moving forward with cleanup. If a company balks at the order, the agency can levy penalties or treble damages -- in which case the agency remediates the toxic site itself and bills the company for three times the cost.

Companies such as GE feel that the agency has used the authority as a negotiating tool, threatening to issue orders even when their sites do not pose an imminent threat to public health or the environment, said Barry Hartman, a former Justice Department attorney now working as an environmental litigator at K&L Gates in Washington, D.C.

"Their original purpose was that if there's a dangerous situation, you want to be able to clean it up and fight about the money later," Hartman said. "It's devolved into EPA using them in a way where you could argue if this is what Congress really intended."

More than 1,700 unilateral orders have been issued since the Superfund statute became law in 1980, according to court documents, and GE -- which is responsible for about 75 Superfund sites -- has been a frequent target. The company filed suit to challenge the orders in 2000, claiming that they violate the constitutional right to due process by forcing companies to incur expenses without being able to make their case in court.

U.S. District Judge John Bates ruled in favor of the agency last year, rejecting what he described as a "broad constitutional attack on a significant federal environmental program" and saying that "courts approach due process claims with scalpels, not cleavers."

The company appealed. Oral arguments in the case are scheduled to take place Tuesday before a three-judge panel of the U.S. Court of Appeals for the District of Columbia, the nation's second-highest federal court.

Superfund cleanups could "slow to a crawl" if EPA could no longer rely on the administrative orders, said Rena Steinzor, an environmental law professor at the University of Maryland and the president of the Center for Progressive Reform. Because the Superfund tax on polluters has not been renewed by Congress and the program's namesake fund ran dry in 2003, the agency has lacked the money to take a "shovels first, lawyers later" approach, she said.

"If this case gets lost, it would be much harder for EPA to persuade companies to voluntarily come in and do the cleanup," Steinzor said.

Hitting companies in the wallet

It costs $4.4 million on average to comply with a unilateral order, according to a study commissioned by GE. Between 1982 and 2006, the orders resulted in a total of $5.5 billion in costs for companies held responsible for Superfund sites.

If companies refuse to comply and are found to have lacked "sufficient cause," they can face fines of up to $32,500 per day -- a level of punishment that effectively eliminates the choice to fight the orders, GE has argued.

In his 2009 ruling, Bates said companies hit with the orders were not being coerced because they could still refuse to comply and face the risk of harsher penalties. Though a unilateral order could damage stock value, brand value or a company's ability to obtain financing, Bates concluded that these possibilities did not provide the underpinning for a due process claim.

"Although GE has presented evidence of isolated errors by EPA, such infrequent errors ... do not warrant the sweeping changes GE requests," Bates wrote. "To the extent that GE continues to believe that EPA generally overuses or abuses [the orders], thereby overstepping its mandate, any broader remedy should be sought from Congress, not the courts."

Attorneys for EPA have contended that companies have opportunities to contest the orders and that requiring evidentiary hearings before every order would be costly and time-consuming for the agency.

"If EPA wants to compel the cleanup the order calls for, it has to file a civil action in federal court to enforce the order," the agency argued, so a company cannot be deprived of property "without getting a chance to defend itself in court."

Environmental groups including Riverkeeper and the Natural Resources Defense Council filed briefs on behalf of the agency, describing GE's ongoing cleanup of polychlorinated biphenyls from the Hudson River as a "concrete illustration of the interests at stake."

Martha Judy, a Superfund expert at Vermont Law School, said a ruling in favor of GE probably would not slow down cleanups as much as claimed by some environmental groups. The agency could instead take its orders to court as civil actions, though that would create new bureaucratic hurdles and add to agency enforcement costs.

"They require less process, so EPA generally prefers to use them," Judy said of the administrative orders. If the court were to rule against the agency, she said, "I'm not sure they would lose much more than the convenience."

The U.S. Chamber of Commerce and National Association of Manufacturers filed briefs supporting GE's position, arguing that expediency is no reason to violate companies' constitutional rights.

"The value of a pre-deprivation hearing before a neutral decisionmaker is not something that must be factually proven in a due process case. Instead, the judgment concerning the value of such hearings was made long ago by the Framers who enshrined the due process guarantee of notice ... into the Fifth Amendment," the chamber argues in its brief. "The very fact that the district court expected GE to justify the value of a pre-deprivation hearing as a factual matter confirms that the court lost sight of basic due process principles."